Samsung, the world’s largest maker of memory chips, this week gaveweaker than expected earnings estimates. Samsung said its third-quarter operating profits were about Won4,800bn ($4.3bn), 14 per cent higher than a year ago but less than the record-high Won5,010bn it posted in the second quarter.

“We are not optimistic at all,” said James Chung, spokesman for Samsung Electronics. “We are rather cautious of the industry’s outlook as we see a possibility of oversupply next year, pulling down prices further.”

Samsung’s chip business, which includes both D-Ram and Flash memory chips, accounts for nearly 70 per cent of its total profits.

Yukio Sakamoto, chief executive of Japan’s Elpida, the third-biggest memory chipmaker, this week told Bloomberg that his company was also likely to miss its earnings estimates.

Ken Guo, an analyst at Taipei-based Dram­exchange, said the next down-cycle “has already begun . . . business cycles in the D-Ram industry have never been very stable and are now getting shorter
and shorter”.

Contract prices for 1 gigabyte of DDR3 D-Ram have fallen 30 per cent from a recent high of $2.72 in May to $1.90 at the end of September, he noted.

With many D-Ram companies still financially vulnerable, a second industry slump would set the stage for weaker players to exit the market, or for more consolidation. Lee Seung-woo, an analyst at Shinyoung Securities in Seoul, said Taiwanese D-Ram makers could be forced out of the market if chip prices fall a further 20 per cent.

Elpida’s Mr Sakamoto said he is considering acquiring shares in some Taiwan D-Ram companies. “It’s almost impossible for the Taiwanese to survive by themselves,” Mr Sakamoto said.

Nevertheless, not everyone is so pessimistic. James Kim, an executive at Korea’s Hynix, the world’s number two chipmaker, said improving production technology means “we can expect reasonable margins next year”.

And Mr Lee, at Shinyoung’s Securities, expects the recent weakness to be “a soft landing”.